{"id":30411,"date":"2020-11-16T09:41:53","date_gmt":"2020-11-16T14:41:53","guid":{"rendered":"https:\/\/panamaadvisoryinternationalgroup.com\/blog\/?p=30411"},"modified":"2020-11-16T09:41:53","modified_gmt":"2020-11-16T14:41:53","slug":"basta-ya-pandemic-related-corruption-calls-new-social-contract-panama","status":"publish","type":"post","link":"https:\/\/panamaadvisoryinternationalgroup.com\/blog\/basta-ya-pandemic-related-corruption-calls-new-social-contract-panama\/","title":{"rendered":"\u00a1Basta Ya! How pandemic-related corruption calls for a new social contract in Panama"},"content":{"rendered":"

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The year 2019\u00a0saw<\/a>\u00a0a wave of demonstrations across Latin America, and governments have attempted to respond to citizen demands with varying degrees of vigor and success. In Panama,\u00a0citizens<\/a>\u00a0have taken to the streets in recent years to protest government corruption. Now amid the COVID-19 pandemic, fresh allegations of corruption and institutional inefficiencies are fueling a renewed push towards reforms and greater transparency. In order for Panama to emerge from the pandemic with inclusive and sustainable growth, the country needs a new social contract that combats corruption and provides equal opportunities for everyone. With the election of Joe Biden\u2014who brings a strong commitment to Latin America and the Caribbean\u2014as president-elect of the United States, now is the perfect time for Panama to take concrete steps to improve its image, in order to attract investment from and strengthen economic ties with the United States.<\/p>\n

Corruption has persisted in Panama for decades. According to the United Nations Office on Drugs and Crime, Panama\u00a0loses<\/a>\u00a0$520 million a year\u2014approximately 1 percent of its gross domestic product (GDP)\u2014to corruption.\u00a0\u00a0<\/a>Investigations surrounding the Odebrecht Case, the largest corruption case in Latin America and the Caribbean,\u00a0<\/a>concluded<\/a>\u00a0in Panama on October 14, 2020: The Brazilian construction company was found guilty of\u00a0paying<\/a>\u00a0more than $100 million in bribes to officials in the governments of former Panamanian presidents Mart\u00edn Torrijos (2004-2009), Ricardo Martinelli (2009-2014) and Juan Carlos Varela (2014-2019). But only ten out of the one hundred individuals charged have been\u00a0convicted<\/a>\u00a0with crimes. The fate of the rest of the suspects lies at the hands of Panama\u2019s judicial system, which is often criticized for\u00a0being<\/a>\u00a0neither independent nor depoliticized.<\/p>\n

As of last month, the Attorney General\u2019s office\u00a0was<\/a>\u00a0investigating over a dozen crimes against the public administration related to irregularities in contracts, cost overruns, and the use of state bonds during the pandemic. Among the several government officials under investigation, Vice President and Minister of the Presidency Jos\u00e9 Gabriel \u201cGaby\u201d Carrizo was\u00a0accused<\/a>\u00a0of overpricing medical equipment and awarding multimillion-dollar contracts to advertising firms. Minister of Public Works\u00a0Rafael Sabonge<\/a>\u00a0has also been targeted by social media campaigns demanding his resignation after allegedly purchasing hospital infrastructure at inflated prices. Earlier in May, Public Security Minister Juan Manuel Pino\u00a0sought<\/a>\u00a0to buy $7.1 million worth of weapons and ammunition, putting the purchase on hold only after public pressure. And while the country\u2019s Social Security Fund (Caja de Seguro Social, or CSS) struggled to find ventilators for COVID-19 patients, Vice Minister of the Presidency Juan Carlos Mu\u00f1oz\u00a0issued<\/a>\u00a0letters of commitment to acquire ventilators at $49,000 each, far above the market price of $5,000 each. Amid protests, Mu\u00f1oz resigned.<\/p>\n

Between September 2019 and September 2020, Panama\u00a0increased<\/a>\u00a0its public debt by $7.5 billion, bringing the total to $36 billion. For the first time since\u00a02006<\/a>, Panama\u2019s public debt has risen above 50 percent of the country\u2019s national GDP, amid allegations of fiscal mismanagement by the government. As a result of a deterioration in Panama\u2019s fiscal and debt metrics, Moody\u2019s\u00a0revised<\/a>\u00a0the country\u2019s outlook from stable to negative. Government-issued bonds have largely contributed to this increase in Panama\u2019s public debt, with limited clarity or transparency regarding how these funds will be allocated.<\/p>\n

A series of other factors, when combined with criticisms over corruption and the country\u2019s rising debt, could unleash social unrest in Panama in the coming months. With a projected GDP\u00a0drop<\/a>\u00a0of 13.6 percent this year, unemployment\u00a0will<\/a>\u00a0grow from 7.1 percent to 25 percent. In other words, the number of people without formal employment will more than triple, with the most affected demographic being those under the age of thirty.<\/p>\n

In times of crisis, confidence and credibility in institutions is needed more than ever. Plagued by international scandals in recent years, and after\u00a0being<\/a>\u00a0added to the Financial Action Task Force (FATF) gray list, the Panamanian government needs to help improve the country\u2019s image to bolster foreign investment. US President-elect Joe Biden will bring a return to US leadership in the region via the mobilization of private investment and the prioritization of economic development. Panama must be able to provide confidence in the equitable and transparent use of resources to generate profitability to investors and the Biden-Harris administration. Attracting foreign investment can help boost sustainable and inclusive economic growth, as well as productivity and the labor force, all of which will be crucial to the post-pandemic recovery.<\/p>\n

While the COVID-19 pandemic presents a number of new socioeconomic challenges and intensifies weaknesses pertaining to inequality and corruption, it also presents an opportunity for the Panamanian government to rethink the future. Panama can emerge from this crisis and embark on a dynamic and sustainable growth path, but only if the country devises a new social contract that strives to provide equal opportunities for all. As in the case of Chile, which on October 25 voted to rewrite the country\u2019s Constitution after mass protests against inequality, a new social contract for Panama must be designed together with its society and must include key proposals for revitalizing the economy, which\u00a0was<\/a>\u00a0one of the fastest growing in the world prior to the pandemic. Most critically, the creation of institutional incentives to deter corruption and an independent judicial system that prosecutes, convicts, and sentences individuals found guilty of corruption must be put in place to address improbity.<\/p>\n

These recommendations are further detailed below:<\/p>\n